BT Group Plc, the U.K.’s biggest fixed-line phone company, declined the most more than two months after Bank of America Merrill Lynch said rising costs from plans to increase sales are endangering earnings growth.
BT fell 2.3 percent to 246.2 pence at the close of trading in London after the Bank of America analysts downgraded the stock to neutral from buy. The shares fell as much as 3.2 percent earlier in the day, the biggest drop since July. The stock has gained 24 percent in 12 months.
BT is investing in a high-speed, fiber-optic Internet service to be rolled out across the U.K. and in the rights to sports programs and mobile spectrum as it combats a drop in revenue from traditional home-phone lines. Those projects alongside years of job reductions, which have left the company with little room to cut costs, will make it more difficult for BT to increase earnings, the analysts said.
Earnings before interest, taxes, depreciation and amortization will fall to 6.09 billion pounds ($9.6 billion) in the fiscal year ending in March from 6.19 billion pounds a year earlier, according to data compiled by Bloomberg. Revenue will probably drop to 18.2 billion pounds from 19.3 billion pounds, according to the same poll.
BT’s decline came even as Societe Generale boosted its 12-month share-price projection by 11 percent to 245 pence. The Bank of America analysts lowered their price target to 265 pence from 285 pence. Of the 27 analysts who share their recommendations with Bloomberg, 13 advocate buying BT shares, while 11 have a hold rating and three advise investors to sell.
The average of 21 analysts who give 12-month price predictions implies that BT shares will rise 4.7 percent in that period.